According to Irs section 61, "Except as otherwise provided in this subtitle, gross income means all income from anyone source derived..." This includes gambling sources of income. There are many assumptions about when to claim the winnings received from casinos. While most understand that the winnings are taxable, many assume that they are reportable only if the casino presents them with a tax form to be filed with their returns. The definite assumption by the taxpayer should be that Any and All winnings should be included in their returns, regardless of the documentation given to them by the casino. In fact, in the event of an Irs audit, a taxpayer having only those tax documents given to them by the casino risks losing all of their claimed gambling loss deductions and potentially paying tax on more than the winnings reported on their provided W-2G.
Irs Publication 529 cautions casual gambling taxpayers to be diligent with maintaining permissible documentation of all gambling activities. Yes, this means an additional one log book to keep up with. The facts recommend by the publication to be documented includes, the date and type of specific wagering activity, the name and address of the gambling establishment, the names of other population gift with you at the establishment, and the amounts of your winnings and losses. Maybe, the most important facts to have recorded is the winnings and losses...listed separately. That's right, no netting the totals at the end of the year and throwing that form in your tax return, especially if you are among those reporting only losses. So, how are we to retell our winnings and losses and at what point in time?
The Internal income Code (Irc) does not offer specific guidelines on how to resolve when winnings and losses occur, but does state that end-of-the-year netting is not allowed. Thankfully, Federal tax law gives guidance in George D. And Lillian M. Shollenberger v. Commissioner of Internal Revenue, T.C. Memo. 2009-306, and Szkircsak v. Commissioner, T.C. Memo. 1980-129.Gambling activity should be accounted for by "sessions." agreeing to the courts, the starting and ending of each session, or transaction, as it is described in the Shollenberger v. Irs case, is essential in determining the net win or loss to record. With no specific rules defining a session in the Irc, we can infer from the courts that it would be too cumbersome to expect a gambler to log each pull of the lever at a slot machine or each hand played at the poker table as an personel session, but rather the net outcome of a series of lever pulls or hands played in a singular session. The net total from that session is then recorded as the win or loss. These session wins are logged separately from session losses and are then recorded on the individual's tax return, with total winnings reported on line 21 on Form 1040 and total losses reported on schedule A of the 1040. Remember, deductions for losses greater than winnings are not allowed.
Complying with the reporting rules of the Irs can be somewhat burdensome, but with the increased whole of gambling establishments in recent years, it is certain that more and more audits are going to be directed at those tax returns with reported gambling income. Retention documentation for gambling income and deductions follows the logic used in requiring documentation for other types of income and documentation such as accepted W-2s and Form 1099s, receipts for purchases, and mileage reimbursement logs.
It is wise to seek further guidance from a tax pro to plan your tax strategy before you resolve to take a opportunity with the casinos. For more facts about this and other tax strategies, please visit us at http://abs1040.com/
Gambling wage is chargeable
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